The influence of the global economy on the decisions of the US Federal Reserve has become a topic of frontline importance in recent months.Since the start of 2016, events in foreign economies have conspired to delay the FOMC’s intended “normalisation” of domestic interest rates, which had apparently been set on a firmly determined path last December.This delay has taken the heat out of the dollar. But the key question now is whether weak foreign activity will continue to trump domestic strength in the US.To judge from last week’s surprisingly hawkish FOMC minutes, which I had not expected, the Fed seems to be reverting to type (see Tim Duy). Many committee members have downplayed foreign risks and have returned to their earlier focus on the strength of the domestic US labour market, which in their view is already at full employment.The Fed is a conservative institution, greatly influenced by its own history. It has always objected to being portrayed as “the world’s central banker”. The dual mandate set by Congress in 1977 for US monetary policy refers to domestic inflation and employment, which fuels suspicions that the Fed ignores other economies altogether.The US central bank certainly has no responsibility to take direct account of the welfare of foreigners. But it (reluctantly) takes note of spillovers in the other direction. The impact of events overseas on the dollar and the domestic US economy are too important to be entirely ignored.

Early history under the gold standard

The weight given to foreign influences has waxed and waned through the decades. The redoubtable Barry Eichengreen objects to the prevailing view, which is that the Fed has always been cut off from the global economy. He points out that the foundation of the Fed in 1913 was in part due to a desire to establish a dollar market in trade credits, thus ending the global monopoly of the sterling acceptance market in the financing of international trade.In the 1920s, the Fed was determined to re-establish the international Gold Standard, which had broken apart during the First World War. Lower domestic interest rates in the US were deemed essential for this objective, because this encouraged gold flows into the UK, helping Britain to resume its role as the centrepiece of the Gold Standard in 1925.When excessively easy domestic monetary policy caused the boom and bust in US equities in 1929, the dollar’s membership of the Gold Standard assumed the opposite role, preventing the Fed from easing domestic monetary conditions sufficiently to combat the Great Depression from 1931-33.

The decades of isolationAfter these debacles, foreign objectives were only rarely in centre stage. In the early 1960s, the FOMC became sufficiently concerned about the US balance of payments to raise domestic interest rates, and in the late 1990s it was forced to reduce rates by the Asian economic crisis.Nonetheless, after Paul Volcker’s programme of disinflation in the early 1980s, the Fed focused primarily on its own back yard. Eichengreen says that the Fed “could afford to act to a first approximation like the central bank of a closed economy”.Later, under Alan Greenspan and Ben Bernanke, the doctrine was that each country should look after its own affairs, since that was the best way of maximising the common good. The case for international co-operation fell completely out of favour.

In fact, I have been told by senior central bankers that Mr Bernanke was sometimes a rather bored bystander at major international conferences, perking up only when asked to give his views about the US economy.

Since the crisis in 2008This changed for only a short while in the 2008 financial crisis, when Mr Bernanke’s Fed crucially provided dollar swap lines with other major central banks in order to prevent the world from running short of dollar liquidity. After the crisis subsided, the Fed returned to its domestic focus, even when many emerging markets complained about the capital inflows into their economies during the Fed’s quantitative easing from 2010-13. They were told, rather bluntly, to take responsibility for their own affairs.

Surprisingly, this isolationist approach was still apparent in a landmark speech by Stanley Fischer in October, 2014. Generally regarded as the most internationally aware member of the Fed Board, Fischer argued strongly that there were indeed global spillovers that the FOMC needed to consider, but nevertheless concluded that the Fed should basically focus on its own domestic objectives.There was little recognition – even after the taper tantrum of 2013 – that the Fed could trigger such a convulsion overseas that it would be dislodged from its own domestic objectives. Instead, Fischer argued that the FOMC’s main responsibility was to ensure that it spelled out its intentions clearly in advance, thus avoiding disruptive policy shocks.

Theory vs practice

As Jim Bullard has recently pointed out, this scepticism about the gains from cooperation between the major central banks was strongly supported by the established international macro-economic theory at the time. Recently, however, the consensus has been changing.Bullard himself wrote an important paper with Aarti Singh in 2008, showing that there could be gains from co-operation if any of the major central banks were departing from “optimal” monetary policy, as defined by a standard Taylor Rule. He speculates that this could now be the case, because both the Bank of Japan and the ECB have hit the zero lower bound on interest rates, and cannot therefore follow optimal monetary policy. This causes instability in the global economy, which the Fed cannot eliminate by focusing only on its domestic objectives.Similar results have been reported in other recent papers [1]. But it seems that the FOMC is still not convinced.Most members of the FOMC have accepted that foreign influences have reduced the equilibrium real rate of interest in the world as a whole, and probably also in the US. But several important FOMC members argue that the current level of US rates is still far below equilibrium, and they conclude that there should be further gradual steps to close the gap, starting fairly soon.These members argue that foreign influences should not be used (as they were in the late 1920s) as a reason to delay the rate increases needed to control domestic inflation and prevent asset price bubbles.

Next steps

Until now, the markets have strongly believed that foreign weakness would severely temper the Fed’s reaction to the tightening in the US labour market. Janet Yellen and William Dudley certainly adopted a dovish line on these issues when the global market convulsions happened in February, but other influential voices (including Stanley Fischer and John Williams) have fought back hard.A hike at the June FOMC meeting still seems somewhat improbable, but July is certainly in play. We will hear more about this in a decisive speech from Janet Yellen on 6 June.

It is past time for the world to get serious about North Korea’s nuclear ambitions.

BARACK OBAMA began his presidency with an impassioned plea for a world without nuclear weapons. This week, in his last year in office (and as we went to press), he was to become the first American president to visit Hiroshima, site of one of only two nuclear attacks. Mr Obama has made progress on nuclear-arms reduction and non-proliferation. He signed a strategic-arms-control treaty (New START) with Russia in 2010. A series of nuclear-security summits helped stop fissile material getting into the wrong hands. Most important, he secured a deal in July to curtail and then constrain Iran’s nuclear programme for at least the next 10-15 years.But in one area, his failure is glaring. On Mr Obama’s watch the nuclear-weapons and missile programme of North Korea has become steadily more alarming. Its nuclear missiles already threaten South Korea and Japan. Sometime during the second term of Mr Obama’s successor, they are likely also to be able to strike New York. Mr Obama put North Korea on the back burner. Whoever becomes America’s next president will not have that luxury.

The other Manhattan Project

The taboo against nuclear weapons rests on three pillars: policies to prevent proliferation, norms against the first use of nukes (especially against non-nuclear powers) and deterrence. North Korea has taken a sledgehammer to all of them.No country in history has spent such a large share of its wealth on nuclear weapons. North Korea is thought to have a stockpile of around 20 devices. Every six weeks or so it adds another. This year the pace of ballistic missile testing has been unprecedented. An underground nuclear detonation in January, claimed by the regime to be an H-bomb (but more likely a souped-up A-bomb), has been followed by tests of the technologies behind nuclear-armed missiles. Although three tests of a 4,000-kilometre (2,500-mile) missile failed in April, North Korean engineers learn from their mistakes. Few would bet against them succeeding in the end.North Korea is not bound by any global rules. Its hereditary dictator, Kim Jong Un, imposes forced labour on hundreds of thousands of his people in the gulag, including whole families, without trial or hope of release. Mr Kim frequently threatens to drench Seoul, the South’s capital, in “a sea of fire”. Nuclear weapons are central to his regime’s identity and survival.Deterrence is based on the belief that states act rationally. But Mr Kim is so opaque and so little is known about how decisions come about in the capital, Pyongyang, that deterring North Korea is fraught with difficulty. Were his regime on the point of collapse, who is to say whether Mr Kim would pull down the temple by unleashing a nuclear attack?The mix of unpredictability, ruthlessness and fragility frustrates policymaking towards Mr Kim. Many outsiders want to force him to behave better. In March, following the recent weapons test, the UN Security Council strengthened sanctions. China is infuriated by Mr Kim’s taunts and provocations (it did not even know about the nuclear test until after it had happened). It agreed to tougher measures, including limiting financial transactions and searching vessels for contraband.

But China does not want to overthrow Mr Kim. It worries that the collapse of a regime on its north-eastern border would create a flood of refugees and eliminate the buffer protecting it from American troops stationed in South Korea. About 90% of North Korea’s trade, worth about $6 billion a year, is with China. It will continue to import North Korean coal and iron ore (and send back fuel oil, food and consumer goods) as long as the money is not spent on military activities—an unenforceable condition.Protected by China, Mr Kim can pursue his nuclear programme with impunity. The sanctions are unlikely to stop him. If anything, they may spur him to strengthen and upgrade his arsenal before China adopts harsher ones.Understandably, therefore, Mr Obama has preferred to devote his efforts to Iran. Because the mullahs depend on sales of oil and gas to the outside world, embargoes on Iran’s energy exports and exclusion from the international payments system changed their strategic calculus. But this logic will not work with North Korea.Can anything stop Mr Kim? Perhaps he will decide to shelve his “nukes first” policy in favour of Chinese-style economic reform and rapprochement with South Korea. It is a nice idea, and Mr Kim has shown some interest in economic development. But nothing suggests he would barter his nuclear weapons to give his people a better life.Perhaps dissent over Mr Kim’s rule among the North Korean elite will lead to a palace coup. A successor might be ready for an Iran-type deal to boost his standing both at home and abroad. That is a possibility, but Mr Kim has so far shown himself able to crush any challengers to his dominance.

The last hope is that tougher sanctions will contribute to the collapse of the regime—which, in turn, could lead to reunification with the South and denuclearisation of the Korean peninsula. That would be the best outcome, but it is also the one that carries the most danger. Moreover, it is precisely the situation China seeks to avoid.

Fat boy

Without any good options, what should America’s next president do? A priority is to strengthen missile defence. New THAAD anti-missile systems should be sent to South Korea and Japan, while America soothes objections that their radar could be used against China’s nuclear weapons. China should also be cajoled into accepting that sanctions can be harsher, without provoking an implosion.Were that to lead initially only to a freeze on testing, it would be worth having. Because a sudden, unforeseen collapse of Mr Kim’s regime is possible at any time, America needs worked-out plans to seize or destroy North Korea’s nuclear missiles before they can be used. For this China’s co-operation, or at least acquiescence, is vital. So clear and present is the danger that even rivals who clash elsewhere in Asia must urgently find new ways to work together.

The IMF, Trying to Lend Europe Credibility for a Greek Bailout, Risks Losing Some of Its Own

By Ian Talley.

Protesters take part in a demonstration against the reform package in front of the Greek Parliament in Athens this week. Greece struck a deal Wednesday to unlock desperately-needed bailout funds for the debt-ridden nation. Photo: Angelos Tzortzinis/Agence France-PresseThe International Monetary Fund acted tough on Greek debt relief. But it appears to have caved under pressure by its largest shareholders, the U.S. and Europe.That means Greece’s economic crisis will likely continue to simmer. It also means the fund may again forfeit some of its credibility for the sake of the eurozone.“The agreement does little to address the underlying problems the Greek economy is currently suffering,” IHS Global Insight economists Diego Iscaro and Blanka Kolenikova said of Europe’s fresh bailout deal. “The promises of debt relief are, in our view, too distant and vague to make a material impact on confidence.”Facing German resistance to upfront debt relief, European, U.S. and IMF officials worried another Greek standoff could fuel global economic and geopolitical instability by giving leverage to proponents of a U.K. exit from the European Union.“There will be no repeat of last year’s drama,” said Marc Chandler, global head of currency strategy at investment bank Brown Brothers Harriman.

But the bailout isn’t for Greece, it’s for Europe, he said. “Greece’s creditors, mostly official, are being kept whole through this paper charade.”Ahead of the latest meeting, the IMF said upfront, unconditional debt relief would be required and that Europe should agree to implement a detailed, concrete restructuring by the end of 2018.By Wednesday, eurozone officials repeated the devil-in-the-details fine print it used (and the IMF approved) in 2012 to sidestep debt relief at the time: The current deal offers restructuring only “if necessary.”

To be sure, whether the IMF will participate remains an open question. IMF European Department chief Poul Thomsen, architect of the emergency lender’s bailout, said the fund would recommend a bailout deal at the end of the year only if Europe commits to detailed debt relief that makes the country’s obligations sustainable.

Putting its imprimatur on the deal—saying the fund intends to contribute more cash—the IMF is lending Europe the credibility German voters required to approve more financing for Greece. Endorsing a deal many economists view as a charade that perpetuates Greece’s crisis undermines the fund’s credibility among its members.From the start of the bailout, emerging markets questioned the IMF role in the rescue as a quintessential example of the Washington-based institution primarily serving the interests of its founding U.S. and European members. It wasn’t credible without debt relief, they argued, and showed the IMF was giving preferential treatment to its largest shareholders.That’s why the IMF’s tougher stance on debt relief last year, and then again this year, appeared to be an effort to salvage that lost credibility.As the IMF’s top spokesman, Gerry Rice, put it last week: Credible policies and substantial debt relief “ensure the uniformity of treatment among our member states, which is, you know, of paramount importance to us. We represent 189 countries.”The senior IMF official on Wednesday said the fund conceded one important point in the talks: not requiring upfront debt relief. But the official said the fact that the IMF hasn’t yet approved new cash and is still requiring debt relief to participate in the bailout preserves the fund’s integrity. “I cannot see how, in any way, it undermines the credibility of the IMF.”The real test of the fund’s credibility may come later this year: All eyes will be watching to see if, and under what debt-relief conditions, the IMF finances a third bailout for Greece.

It’s said loud and clear on the Street that clients and investors in general aren’t buying this rally. Low volume suggests this. Tuesday markets were weak early given BREXIT worries but then out of the blue buyers appeared boosting markets well off their lows. Wednesday stocks opened weak once again but then found their footing as given mostly weak economic data and rallied off their lows and closing higher.The data contained we overseas data from China (PMI Mfg Index was still weak hanging on to a flat reading at only 50.1) while Europe PMI Mfg Index readings fell to only 51.5 vs prior 52.1).When U.S markets opened stocks were met by mixed to weak economic data. PMI Mfg Index fell to flat 50.7 vs 50.8; ISM Mfg Index was up slightly to a flattis 51.3 vs 50.8; Construction Spending fell to -1.8% vs prior 1.5%; and, then was the Beige Book which according to the Fed showed tighter labor market conditions. An open door to an interest rate hike in July but not June? Sounds like flimsy reasoning to me, but then I’m not the invisible hand behind the curtain.It might go along with the old farmers’ adage, “The thing you know best is what you like least”. Count me in. Nevertheless, like other trend-followers, I have stay long for now even if, like others I have to hold my nose at the entire affair. (sigh)Below is the heat map from Finviz reflecting those ETF market sectors moving higher (green) and falling (red). Dependent on the day (green) may mean leveraged inverse or leveraged short (red).Volume may set a new record for light for a mid-week day with lots of news. Breadth per the WSJ was positive but not so much for Money Flow.

SPY 5 MINUTE

SPX DAILY

SPX WEEKLY

INDU DAILY

INDU WEEKLY

RUT WEEKLY

NDX WEEKLY

NYMO DAILY

The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

NYSI DAILY

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

VIX WEEKLY

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation has changed due to a variety of new factors including HFTs, new VIX linked ETPs and a multitude of new products to leverage trading and change or obscure prior VIX relevance.

NEW YORK – This month marks the centenary of the Sykes-Picot Agreement, the secret British-French accord that launched a decade-long series of adjustments to the borders of the post-Ottoman Middle East. Most commentary on the anniversary has been negative, suggesting that the agreement bears considerable blame for the frequency and durability of the region’s conflicts.

That interpretation, however, borders on caricature. Mark Sykes and François Georges-Picot aimed to devise a plan that would enable Great Britain and France to avoid a ruinous rivalry in the Middle East. They largely succeeded: Their design kept the region from coming between the two European powers, and it managed to survive for a century.

To be sure, many of the Sykes-Picot borders reflected deals cut in Europe rather than local demographic or historical realities. But that hardly makes the Middle East unique: Most borders around the world owe their legacy less to thoughtful design or popular choice than to some mixture of violence, ambition, geography, and chance.

The unpleasant reality is that today’s Middle East is what it is because its people and leaders have done such a bad job in shaping it. Sykes and Picot cannot be blamed for the region’s pervasive lack of tolerance and political freedom, poor schools, or the unfair ways in which girls and women are treated. Other parts of the world (including those without enormous reserves of oil and gas) have emerged from colonialism in much better shape.

The factors accounting for the record of failure in the Middle East – history, culture, religion, and personalities – are worthy of serious examination. But the more pressing question that this anniversary raises has less to do with historical analysis than it does with current policy.

In much of the Middle East, a violent struggle for mastery is the new normal. In four – arguably five – countries in the region, the government does not control significant portions of the state’s territory.

Lebanon has been in this condition for decades, Iraq for more than a decade, and Syria, Libya, and Yemen for some five years now. Militias, terrorist organizations, foreign fighters, and other armed groups have asserted varying degrees of local authority.

There are also the unfulfilled national aspirations of the Kurds (large numbers of whom live in Turkey, Iraq, Syria, and Iran) and the unresolved matter of how to reconcile the reality of Israel with the Palestinians’ political goals. The border between Syria and Iraq is for all intents and purposes gone. Millions of men, women, and children find themselves living in a country that is not their own.

What, then, should be done? One option would be to try to preserve – or, more accurately, restore – the Sykes-Picot Middle East. But attempting to reunify the countries that appear on the map – and to make the borders between them matter – would be folly. These countries will not go back to what they were; ties to region, religion, tribe, ethnicity, and/or ideology have in many cases superseded national identities.

A second option would be to try to negotiate the terms of a new Middle East, a successor to Sykes-Picot. This, too, would prove to be an expensive failure. Redrawing the map might be possible one day, but that day is decades away, at best. There is simply no consensus on what the map should look like, and no party or alliance that could impose or uphold it. As a rule of thumb, diplomacy can be expected only to work with facts on the ground, not to create them, and the facts on the ground stand in the way of a regional settlement.

All of this leads to a third option: Acceptance of the fact that for the foreseeable future the Middle East will not resemble what appears on maps and globes. This is not an argument for remaining aloof; as bad as things are, they can always get worse. To see that they do not, governments and organizations that meet certain standards can and should be strengthened; those that do not can and should be weakened.

But no level of effort will alter the region’s basic reality: borders that count for little and governments that count for only a little more. Syria, Iraq, and Libya are likely to be countries in name only; important parts of each will essentially be autonomous and on their own, for better or worse. The fact that Turkey, Iran, Saudi Arabia, Israel, Russia, and the United States are working at cross-purposes more often than not further suggests a messy future without legal foundation.

In some ways, the pre-Sykes-Picot Middle East is coming back – but without the order imposed by the Ottoman Empire. As a result, the Middle East stands to suffer far worse in the next century than it did in the last – a reality that could well leave us nostalgic for the times of Sykes and Picot.

In general, you shouldn’t pay much attention to polls at this point, especially with Republicans unifying around Donald Trump while Bernie Sanders hasn’t conceded the inevitable. Still, I was struck by several recentpolls showing Mr. Trump favored over Hillary Clinton on the question of who can best manage the economy.

This is pretty remarkable given the incoherence and wild irresponsibility of Mr. Trump’s policy pronouncements. Granted, most voters probably don’t know anything about that, in part thanks to substance-free news coverage. But if voters don’t know anything about Mr. Trump’s policies, why their favorable impression of his economic management skills?

The answer, I suspect, is that voters see Mr. Trump as a hugely successful businessman, and they believe that business success translates into economic expertise. They are, however, probably wrong about the first, and definitely wrong about the second: Even genuinely brilliant businesspeople are often clueless about economic policy.

An aside: In part this is surely a partisan thing. Over the years, polls have generally, although not universally, shown Republicans trusted over Democrats to manage the economy, even though the economy has consistently performed better under Democratic presidents. But Republicans are much better at promoting legends — for example, by constantly hyping economic and jobs growth under Ronald Reagan, even though the Reagan record was easily surpassed under Bill Clinton.

Back to Mr. Trump: One of the many peculiar things about his run for the White House is that it rests heavily on his claims of being a masterful businessman, yet it’s far from clear how good he really is at the “art of the deal.” Independent estimates suggest that he’s much less wealthy than he says he is, and probably has much lower income than he claims to have, too. But since he has broken with all precedents by refusing to release his tax returns, it’s impossible to resolve such disputes. (And maybe that’s why he won’t release those returns.)

Remember, too, that Mr. Trump is a clear case of someone born on third base who imagines that he hit a triple: He inherited a fortune, and it’s far from clear that he has expanded that fortune any more than he would have if he had simply parked the money in an index fund.

But leave questions about whether Mr. Trump is the business genius he claims to be on one side.

Does business success carry with it the knowledge and instincts needed to make good economic policy? No, it doesn’t.

True, the historical record isn’t much of a guide, since only one modern president had a previous successful career in business. And maybe Herbert Hoover was an outlier.

But while we haven’t had many business leaders in the White House, we do know what kind of advice prominent businessmen give on economic policy. And it’s often startlingly bad, for two reasons. One is that wealthy, powerful people sometimes don’t know what they don’t know — and who’s going to tell them? The other is that a country is nothing like a corporation, and running a national economy is nothing like running a business.

Here’s a specific, and relevant, example of the difference. Last fall, the now-presumed Republican nominee declared: “Our wages are too high. We have to compete with other countries.” Then, as has happened often in this campaign, Mr. Trump denied that he had said what he had, in fact, said — straight talker, my toupee. But never mind.

The truth is that wage cuts are the last thing America needs right now: We sell most of what we produce to ourselves, and wage cuts would hurt domestic sales by reducing purchasing power and increasing the burden of private-sector debt. Lower wages probably wouldn’t even help the fraction of the U.S. economy that competes internationally, since they would normally lead to a stronger dollar, negating any competitive advantage.

The point, however, is that these feedback effects from wage cuts aren’t the sort of things even very smart business leaders need to take into account to run their companies. Businesses sell stuff to other people; they don’t need to worry about the effect of their cost-cutting measures on demand for their products. Managing national economic policy, on the other hand, is all about the feedback.

I’m not saying that business success is inherently disqualifying when it comes to policy making. A tycoon who has enough humility to realize that he doesn’t already know all the answers, and is willing to listen to other people even when they contradict him, could do fine as an economic manager. But does this describe anyone currently running for president?

The truth is that the idea that Donald Trump, of all people, knows how to run the U.S. economy is ludicrous. But will voters ever recognize that truth?and politics.

So, word got out here in Argentina that I was turning 70. And that meant a fiesta was in order. I hate celebrating my birthday, but it would be churlish to wave off people who like that sort of thing.I was invited to a party put on by some of my neighbors. Vintners, horse breeders, ranchers, farmers, and the like. An interesting group. Rich, sophisticated; the local upper crust. I’d only met perhaps a third of them before that evening. It turns out that most of them get together weekly, at one estancia or another, and have an exotic asado cum drinking party. I served as this week’s center of attention and entertainment.It was different from similar parties I’ve been to in Buenos Aires in that everyone here was speaking Spanish, with a smattering of English. In BA, the conversation at a dinner table is typically multilingual—Spanish, English, French, German, and Italian can all be used.People were patient with me, understanding that Americans, among their other faults, generally lack linguistic sophistication. My French (now rusty and affreux) is still better than my Spanish, mainly because I went to school for a year in Switzerland. My German is even worse, even though the 500 basic English words are all German cognates.I’ve always envied Sir Richard Burton, who, it was said, could speak 10 languages fluently and 15 more reasonably well. But that is now, I suppose, a quaint 19th century skill. Soon, your smartphone will give you simultaneous translations in a hundred tongues.Anyway, back to the party. Argentina, of all the countries in the world, most resembles ancient Rome. The whole country revolves around BA, the way the early Roman Empire revolved around Rome. Successful people all have a place in the capital, one in the country, and another on the ocean for when it’s hot in the summer. And they socialize like the Romans, with dinner parties that last well into the wee hours, as a matter of course. First, you’re served hors d’oeuvres and champagne. Then various sausages and warm meats. Then the main course and vegetables. Then pasta. Then fruit and a desert. You’re now halfway through. Next come the after-dinner drinks and cigars. Finally, coca leaves, which most everyone chews for the rest of the evening; they’re a delightful digestif. And conversation for the whole six hours.What did we talk about? Many things, of course, including the economy, the world situation, politics, and the recent Argentine and upcoming U.S. elections. And, for exotica, my recent (a couple weeks before) visit to Zimbabwe.Everyone had heard it said that Hillary was going to be the next president. Nobody liked the idea, if only because Argentina has had uniformly disastrous experiences with populist female politicians.Perón’s first wife, the famous Evita, acted as a shadow president and set the tone for the country’s long decline. Then came Perón’s second wife, Isabel, an Evita look-alike/act-alike, who was first his vice president and then succeeded him as president after he died. Then came Cristina Kirchner, the wife of another president who died in office. Who supported Evita, Isabel, and Cristina? Exactly the same type of people who support Hillary in the U.S.—the 50% receiving state benefits, the envy-driven, the stupid, the naïve, the ignorant, and, of course, those members of the moneyed classes who use their political connections to steal massive quantities. Everyone (including myself) was shocked, but extremely thankful, that Cristina’s surrogate was beaten by Mauricio Macri.Macri is hardly John Galt, but my guess is that the country will experience a boom in the next few years. Why? Agricultural products are at rock bottom after a long, deep bear market; tens of billions of additional money will flow into Argentina with higher ag prices. The new government has discarded agricultural export taxes ranging to 40% (before income and other taxes); as a result, production will likely go up 50%, bringing in many more billions. Some of the estimated $200 billion that Argentines have abroad is now likely to come back. And with the settlement for the holdouts from the government’s $100 billion default 15 years ago, lots more money will flow into the country. A general deregulation of the economy, now in progress, will further increase prosperity.So, I told them, things were likely to get better in Argentina while they would get worse in the U.S. They agreed, since everything they read and hear assures them that Hillary is certainly the next president. But I told them Trump would likely win in a landslide. They were shocked, since all the foreign media describe him as the devil incarnate. I assured them that he was the lesser of two evils. And then shocked them again by saying that since I don’t care to be complicit in a crime, I wasn’t voting.Titillated by these outrageous views, they wanted to hear about my week in Zimbabwe. I told them I was there pursuing my longstanding hobby of trying to peacefully replace dysfunctional governments. Since I first hatched my unique approach to the task, I’ve taken a shot at about a dozen Third World backwaters. It started 35 years ago when I proposed to a certain small Caribbean island country that they issue “economic citizenships.” Then on to my first dictatorship run by a frightened sociopath. Then to a couple places in the Pacific. A military dictatorship in South America. A few trouble spots in Africa. Then an Islamic republic. Then Zimbabwe.For your reference, a very brief summary of the plan I pitched to government leaders can be found here. There have been times I thought I was pretty close to making the sale. Including Zim this time. Since they totally destroyed their currency in 2009, they’ve only used foreign units—South African rand, Botswana pula, Zambian kwacha, euros, and, of course, dollars—to buy and sell. People prefer dollars, since they’re far more fungible than the other units.But since the U.S. government has the country (or at least almost all of its leaders) on its naughty list, dollars are hard to come by. That’s especially true because Zim has huge balance-of-trade and balance-of-payments deficits. It has to import almost everything since the government has effectively destroyed all the domestic industry, including agriculture.I first went to Zim in the late ’70s, when it was Rhodesia and a full-blown civil war was raging. Which is, believe it or not, often the best time to visit a country. At least if you’re looking for either adventure or bargains. Boredom and high prices, their opposites, dominate all the popular places. I was there a couple of times when it was Rhodesia, once when it was Rhodesia-Zimbabwe, and several times since. Including at the very height of the famous runaway inflation in 2009. I still carry a 100 trillion dollar bill in my wallet as a conversation piece.It’s signed by Gideon Gono, who was the chairman of their Reserve Bank at the time. You may be asking yourself: What kind of man could Mr. Gono be that he’d print a 100 trillion dollar bill? As it turned out, I spent a fair amount of time with Gideon, and not only is he highly intelligent, not only does he actually understand economics, but—and I kid you not—he quotes Ludwig von Mises and follows Austrian economics. And, when we had dinner at his house, he played a CD of Porter Stansberry speaking about money. Gideon is the personal banker and close personal friend of His Excellency the President Comrade Robert Mugabe.Unfortunately, I never met with the Big Man himself for reasons that remain a bit unclear. The 92-year-old may have been in Singapore for medical consultations, and that would be considered a state secret. But I had excellent meetings with all of his ministers who have anything to do with economics, finance, or trade. They were all very receptive to my radical plan. It was a bit of a “Twilight Zone” experience to get that kind of reception in a central African country on the cusp of a real disaster.Why do I say that? Because the government is totally and absolutely out of money. They don’t have a national currency and don’t have enough foreign paper (rand, pula, dollars, etc.) to pay even teachers or nurses. Or, much more important, the 40,000-man army. Any government that doesn’t pay the army is asking for trouble, especially in Africa. I probably should have gone out of my way to meet some generals.Instead, I wasted a morning with a current co-chair of the Reserve Bank and a bunch of her “economists”—so called because they all had degrees from prestigious universities. It was the only place me and my radical plan got a cold reception. The reason is that they’ve just come out with a new currency, in effect a bond, which they promise to redeem in U.S. dollars at some future date. It will, of course, reach its intrinsic value of zero in short order.In any event, my Argentine dinner companions were entertained with the goings-on of a country that they’d only vaguely heard about. And ears perked up when I mentioned that, while I was in Zim, there was a polo tournament (Argentina being the world’s polo capital, one of the reasons I moved there) outside Harare with eight teams—which means 32 players and somewhere between 120 and 200 horses. It’s amazing to think this is happening while about 80% of the country’s 12 million people are on the ragged edge of starvation. But that’s par for the course in a centrally planned, hyperinflationary economy. Argentines understand that perfectly.And Americans will get some firsthand reality on it, too, over the next few years, I promise.

We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.